Poor health habits such as smoking, drinking, and lack of exercise are major causes of preventable illness and death. The adverse effects of these habits are not limited to those individuals who have them; for example, there are effects of second-hand smoking on children. This grant will examine the economic costs in increased medical use, sick loss, and risks of dying of poor health habits such as smoking, drinking, and lack of exercise. Longitudinal data from a randomized trial of health insurance, the Rand Health Insurance Study (HIS), provide a unique opportunity to investigate relationships between health habits and health outcomes. Data exist and are cleaned for three to five years on medical use and sick-loss time, and entry and exit health status for 4,600 adults and 3,100 children. We will compare trends in individual health habits and risk factors for mortality and disease among subgroups defined by age, sex, and race. We will examine poor health habits as causes and correlates of use, sick loss, and risks of dying. These results will be combined to estimate the lifetime costs of smoking, drinking, and lack of exercise, to estimate the subsidies to poor habits from health insurance and sick leave, and transfers between people with different habits. These costs will inform the current debate on higher excise taxes for cigarettes and alcoholic beverages. Extensive data on participants permits adjustment for other differences between those with good and poor habits including insurance coverage, demographic and economic variables, physiological and generic measures of health status, and attitudes (e.g., weight, spirometry, physical and mental health, health perceptions, attitudes about self and medical care). Multiple regression techniques will be used to estimate the separate effects of several habits and other influences on health outcomes.